IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Liquidity in Frictional Asset Markets

  • GUILLAUME ROCHETEAU
  • PIERRE‐OLIVIER WEILL

On November 14-15, 2008, the Federal Reserve Bank of Cleveland hosted a conference on “Liquidity in Frictional Asset Markets.” In this paper we review the literature on asset markets with trading frictions in both finance and monetary theory using a simple search-theoretic model, and we discuss the papers presented at the conference in the context of this literature. We will show the diversity of topics covered in this literature, e.g., the dynamics of housing and credit markets, the functioning of payment systems, optimal monetary policy and the cost of inflation, the role of banks, the effect of informational frictions on asset trading.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1111/j.1538-4616.2011.00435.x
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 43 (2011)
Issue (Month): (October)
Pages: 261-282

as
in new window

Handle: RePEc:mcb:jmoncb:v:43:y:2011:i::p:261-282
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Gara M. Afonso & Hyun Song Shin, 2008. "Systemic risk and liquidity in payment systems," Staff Reports 352, Federal Reserve Bank of New York.
  2. Stephen D. Williamson & Randall Wright, 2010. "New Monetarist Economics: models," Staff Report 443, Federal Reserve Bank of Minneapolis.
  3. Ricardo Lagos & Guillaume Rocheteau & Pierre-Olivier Weill, 2009. "Crises and Liquidity in Over-the-Counter Markets," NBER Working Papers 15414, National Bureau of Economic Research, Inc.
  4. Andrew Caplin & John Leahy, 2008. "Trading Frictions and House Price Dynamics," NBER Working Papers 14605, National Bureau of Economic Research, Inc.
  5. Dimitri Vayanos & Pierre-Olivier Weill, 2008. "A Search-Based Theory of the On-the-Run Phenomenon," Journal of Finance, American Finance Association, vol. 63(3), pages 1361-1398, 06.
  6. Weill, Pierre-Olivier, 2011. "Liquidity Provision In Capacity-Constrained Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S1), pages 119-144, April.
  7. Athanasios Geromichalos & Juan M Licari & Jose Suarez-Lledo, 2007. "Monetary Policy and Asset Prices," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 761-779, October.
  8. Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market liquidity and funding liquidity," LSE Research Online Documents on Economics 24478, London School of Economics and Political Science, LSE Library.
  9. Aleksander Berentsen & Gabriele Camera & Christopher Waller, 2005. "Money, Credit and Banking," CESifo Working Paper Series 1617, CESifo Group Munich.
  10. Vayanos, Dimitri & Wang, Tan, 2007. "Search and endogenous concentration of liquidity in asset markets," Journal of Economic Theory, Elsevier, vol. 136(1), pages 66-104, September.
  11. Guillaume Rocheteau, 2009. "A monetary approach to asset liquidity," Working Paper 0901, Federal Reserve Bank of Cleveland.
  12. Shouyong Shi, 1995. "Credit and Money in a Search Model with Divisible Commodities," Working Papers 917, Queen's University, Department of Economics.
  13. Ricardo Cavalcanti & Ed Nosal, 2007. "Counterfeiting as private money in mechanism design," Working Paper 0716, Federal Reserve Bank of Cleveland.
  14. Ricardo Lagos & Guillaume Rocheteau, 2007. "Liquidity in asset markets with search frictions," Working Paper 0706, Federal Reserve Bank of Cleveland.
  15. Taylor, Curtis R, 1995. "The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 837-55, August.
  16. Freeman, Scott, 1996. "Clearinghouse banks and banknote over-issue," Journal of Monetary Economics, Elsevier, vol. 38(1), pages 101-115, August.
  17. Koeppl, Thorsten Volker & Monnet, Cyril & Temzelides, Ted, 2006. "A dynamic model of settlement," Working Paper Series 0604, European Central Bank.
  18. Ricardo Lagos, 2006. "Asset prices and liquidity in an exchange economy," Staff Report 373, Federal Reserve Bank of Minneapolis.
  19. Guillaume Rocheteau & Randall Wright, 2003. "Money in Search Equilibrium, in Competitive Equilibrium, and in Competitive Search Equilibrium," PIER Working Paper Archive 03-031, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  20. Jianjun Miao, 2004. "A Search Model of Centralized and Decentralized Trade," Microeconomics 0410003, EconWPA.
  21. Jonathan Chiu & Miguel Molico, 2011. "Uncertainty, Inflation, and Welfare," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 487-512, October.
  22. Nicolas L. Jacquet & Serene Tan, 2007. "On the Segmentation of Markets," Working Papers 18-2007, Singapore Management University, School of Economics.
  23. Adam Ashcraft & James McAndrews & David Skeie, 2009. "Precautionary reserves and the interbank market," Staff Reports 370, Federal Reserve Bank of New York.
  24. Afonso, Gara, 2011. "Liquidity and congestion," Journal of Financial Intermediation, Elsevier, vol. 20(3), pages 324-360, July.
  25. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  26. Alessandro Gavazza, 2011. "The Role of Trading Frictions in Real Asset Markets," American Economic Review, American Economic Association, vol. 101(4), pages 1106-43, June.
  27. Margaret Stevens, 2007. "New Microfoundations For The Aggregate Matching Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 847-868, 08.
  28. Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
  29. Williamson, Steve & Wright, Randall, 1994. "Barter and Monetary Exchange under Private Information," American Economic Review, American Economic Association, vol. 84(1), pages 104-23, March.
  30. Ricardo Lagos & Guillaume Rocheteau, 2007. "Search in Asset Markets: Market Structure, Liquidity, and Welfare," American Economic Review, American Economic Association, vol. 97(2), pages 198-202, May.
  31. Coles, Melvyn G & Smith, Eric, 1994. "Marketplaces and Matching," CEPR Discussion Papers 1048, C.E.P.R. Discussion Papers.
  32. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
  33. Shouyong Shi, 1996. "A Divisible Search Model of Fiat Money," Working Papers 930, Queen's University, Department of Economics.
  34. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2011. "Information and Liquidity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 355-377, October.
  35. Guillaume Plantin, 2009. "Learning by Holding and Liquidity," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 395-412.
  36. Amy K. Edwards & Lawrence E. Harris & Michael S. Piwowar, 2007. "Corporate Bond Market Transaction Costs and Transparency," Journal of Finance, American Finance Association, vol. 62(3), pages 1421-1451, 06.
  37. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
  38. Shimer, R. & Smith, L., 1997. "Assortative Matching and Search," Working papers 97-2a, Massachusetts Institute of Technology (MIT), Department of Economics.
  39. Ricardo Lagos, 2009. "Asset Prices, Liquidity, and Monetary Policy in an Exchange Economy," 2009 Meeting Papers 390, Society for Economic Dynamics.
  40. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  41. Spulber, Daniel F, 1996. "Market Making by Price-Setting Firms," Review of Economic Studies, Wiley Blackwell, vol. 63(4), pages 559-80, October.
  42. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  43. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "Inside and outside money as alternative media of exchange," Proceedings, Federal Reserve Bank of Cleveland, pages 443-468.
  44. Adam B. Ashcraft & Darrell Duffie, 2007. "Systemic Illiquidity in the Federal Funds Market," American Economic Review, American Economic Association, vol. 97(2), pages 221-225, May.
  45. Li, Yiting, 1998. "Middlemen and private information," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 131-159, June.
  46. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:43:y:2011:i::p:261-282. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.